Barron's Interview John Keeley Jr.
6022 views
Rate Now: 1 2 3 4

average rating: 0.00 / 0 ratings
Created by barrons2
DESCRIPTION:

Date updated:08-09-2008

Talking With John Keeley Jr., Founder and Chief Investment Officer, Keeley Asset Management. The 15-year-old Keeley Small Cap Value Fund (KSCVX) searches for little-known companies going through restructurings or spinoffs, trading at significant discounts and not included in popular indexes.

symbol name last price % change open
  • +
  • ANR
    Alpha Natural Res
  • $41.83
  • +3.54%
  • $41.75

One recent example: Keeley Small Cap Value's largest holding, metallurgical coal maker Alpha Natural Resources (ANR), spun out of Pittston Coal in 2002, is being taken over for $10 billion by Cleveland-Cliffs (CLF). The shares are up 206% this year.

People owning ANR also tend to own: AAPLEPGSHDMOPMRIMM

TheStreet.com Rating: C+ What is this?

  • +
  • CLF
    Cliffs Natural
  • $42.75
  • +5.48%
  • $41.97

One recent example: Keeley Small Cap Value's largest holding, metallurgical coal maker Alpha Natural Resources (ANR), spun out of Pittston Coal in 2002, is being taken over for $10 billion by Cleveland-Cliffs (CLF). The shares are up 206% this year.

People owning CLF also tend to own: AKHFPLPWEISNEWOSIRPPL

TheStreet.com Rating: C What is this?

  • +
  • HOME
    Home Federal Banc
  • $12.88
  • +0.39%
  • $12.77

One area of recent interest to Keeley and his team is savings-and-loan and insurance conversions, since they allow the Small Cap Value Fund to buy a new stock without an underwriter. They bought Home Federal Bancorp (HOME), a Nampa, Idaho-based former mutual savings-and-loan that just completed a conversion in December 2007 at $10. "The proceeds of the conversion give Home an equity-to-assets ratio over 27%, among the highest in the country," according to Zahorik, who doesn't rule out that the company will be acquired at two times book value, or 23.50 per share, after three years. It recently was at 10.80. "While many community banks and thrifts are thinly capitalized, Home is heavily overcapitalized, yet still trades at just 87% of tangible book," Zahorik says. "In late December, Home will be permitted to deploy capital in the form of stock buybacks. Given the high level of excess capital, these buybacks could be substantial." Earnings estimates are 24 cents a share for this fiscal year, and 26 cents a share in 2009.

People owning HOME also tend to own: AKSBTCEGCKPCMACNSCOL

TheStreet.com Rating: C What is this?

  • +
  • HRC
    Hill-rom Holdings
  • $23.88
  • 0.00%
  • $N/A

In April, Keeley picked up Batesville, Ind.-based Hill- Rom Holdings (HRC), formerly Hillenbrand Industries, in the mid-20s following a spinoff and renaming. Hill-Rom manufactures and provides technologies and related services for the health-care industry, including patient-support systems like multipurpose beds that can also be used as chairs and as transportation. Earnings estimates are $1.25 a share for this fiscal year and $1.47 for the next.

People owning HRC also tend to own: ABCASHAYIBRBUCYCBICFL

TheStreet.com Rating: D What is this?

  • +
  • PMC
    Pharmerica Corp
  • $16.55
  • 0.00%
  • $N/A

Some spinoffs that undergo additional restructuring are also are of interest to Keeley. The firm bought Louisville, Ky.-based PharMerica (PMC), which was created in 2007 from the merger of two leading institutional pharmacy businesses -- PharMerica Long-Term Care and Kindred Pharmacy Services. PharMerica Long-Term was spun out from AmerisourceBergen (ABC), a drug wholesaler. It then was merged with Kindred. The new company operates 115 institutional pharmacies that service 340,000 beds. "So in addition to the benefits of a spinoff and restructuring, you have a demographic play as the population ages," says health-care specialist Woodyatt. Small Cap Value bought it in April at around 15. It has since risen to about 24. The Street estimates earnings of 78 cents a share this fiscal year and $1.04 next year.

People owning PMC also tend to own: ACAPACORAIRMALXNANSSARBAASEI

TheStreet.com Rating: C- What is this?

  • +
  • HK
    Petrohawk Energy
  • $21.67
  • 0.00%
  • $N/A

The firm acquired shares of Houston-based Petrohawk Energy (HK), an independent oil and natural-gas company, via Petrohawk's merger with KCS Energy, a Keeley holding. The new company found significant natural gas in the Haynesville Shale along the U.S. Gulf Coast, which may hold twice the reserves of the entire country. "This is an example of higher energy prices and new technology producing a significant supply response," Kindig says, adding that the potential is so huge that nobody has a good estimate on what will come onstream in the next five years. Keeley bought KCS at about 12 in 2003 and continued to add to the position after the merger. Petrohawk, which has been under significant selling pressure in the past three weeks as the price of natural gas has fallen along with the price of oil, was recently near 31. Kindig puts earnings at $1.28 a share this year and at $2.15 in '09, which is considerably higher than the Street's estimates.

People owning HK also tend to own: AAPLCCAKECSCODNDNHMYHXL

TheStreet.com Rating: C What is this?

  • +
  • KCS
    Kcs
  • $0.00
  • N/A
  • $N/A

The firm acquired shares of Houston-based Petrohawk Energy (HK), an independent oil and natural-gas company, via Petrohawk's merger with KCS Energy, a Keeley holding. The new company found significant natural gas in the Haynesville Shale along the U.S. Gulf Coast, which may hold twice the reserves of the entire country. "This is an example of higher energy prices and new technology producing a significant supply response," Kindig says, adding that the potential is so huge that nobody has a good estimate on what will come onstream in the next five years. Keeley bought KCS at about 12 in 2003 and continued to add to the position after the merger. Petrohawk, which has been under significant selling pressure in the past three weeks as the price of natural gas has fallen along with the price of oil, was recently near 31. Kindig puts earnings at $1.28 a share this year and at $2.15 in '09, which is considerably higher than the Street's estimates.

People owning KCS also tend to own: ANRCLFHKHOMEHRCPMCWLT

TheStreet.com Rating: No Rating What is this?

  • +
  • WLT
    Walter Energy
  • $69.41
  • +4.96%
  • $67.71

One favorite is Tampa, Fla.-based Walter Industries (WLT), which has a booming coal business. It is also an on-the-lot home builder, which used to finance buyers and has a low loan-delinquency rate. Keeley was buying Walter at 21 in 2007, and the shares recently traded above 90. Earnings estimates are $5.58 a share for this fiscal year, jumping to $15.44 for next year because of high metallurgical-coal prices and the prospect of a new mine opening.

People owning WLT also tend to own: AAVABXAADGAMATAQRBGRBXL

TheStreet.com Rating: B- What is this?

Portfolio not tracked!

Comments not available

ADD YOUR COMMENTS:

Must-See Charts: Ralcorp, Del Mo...

By Jonas Elmerraji Posted on Feb. 9, 2010 With stocks continuing to underwhelm in yesterday’s trading session, the attention is turning toward trading. After all, tec...

02.09.10 | 12:06 PM
This Week's 'Barron's' Roundup

By Roberto Pedone Posted on Feb. 8, 2010 Good Buys For Bad Times: This Barron’s article says with the U.S. economy expected to grow by only 3% in 2010, investors shou...

02.08.10 | 16:28 PM
Cramer's Take on Headline Stocks...

Posted on Feb. 8, 2010 Finance Professor Scott Rothbort will be answering questions on Stockpickr Answers on Monday, Feb. 8. Ask away! Regardless of why a stock is in...

02.08.10 | 14:45 PM
Rocket Stocks for the Week

By Jonas Elmerraji Posted on Feb. 8, 2010 Finance Professor Scott Rothbort will be answering questions on Stockpickr Answers on Monday, Feb. 8. Ask away! Investor an...

02.08.10 | 08:39 AM
more articles
Nymph's Trading Daily Trading Diary
04.13.09 | 01:10 AM From author Trading Nymph
Speculation and Rumors
05.22.09 | 01:01 AM From author DaveOfDuke
Pump and Dump Schemes
08.01.09 | 10:52 AM From author CallaLilly
3 Steps to Better Putting
02.10.10 | 00:25 AM From author fanliping
more forums
today 's lists
Dividends: Tomorrow's Ex-Divide...

Below is a list of some of the companies that have their ex-dividend date Wednesday, Feb. 10, 2010. What is the ex-dividend date? According to Dividends.com: The ex-... more

Dogs of the Dow

Here are the 10 stocks in the Dow Jones Industrial Average with the highest yields as of the market close on Feb. 5, 2009. more

Analyst Upgrades

Analyst Upgrades and EPS estimate changes for Feb. 9, 2010. more